As brick and mortar stores fall to online commerce sites routinely doing business across state lines, the Multistate Tax Commission moved to update their interpretation of Public Law 86-272, the federal statute that limits a states’ ability to levy net income taxes on out of state businesses and shields companies whose only activity in the state is the solicitation of orders of tangible personal property shipped from another state from a state’s net income tax.
The updated Multistate Tax Commission model statement argues the protection PL 86-272 afforded multistate businesses has become increasingly narrow. The bulk of the updates involve e-commerce and how online businesses interact with customers in other states and clarifies what interaction is not protected under the federal statute. Here are some common out of state business activities not protected by PL 86-272:
- Cookies placed on in-state customers’ computers (except for reasons not related to the solicitation of orders for tangible personal property)
- Chat or email in-state customer service product assistance
- Repair and upgrade purchases by in-state customers through a code or other electronic signal to their products through the internet
- Extended warranties sold to in-state customers
Each member state will need to adopt the revisions. If you have any questions, please contact your Henry+Horne advisor.